This blog started as merely a means of describing who was behind certain spam campaigns and which illicit products they were selling illegally. Now it's more of an overall examination of how spam is merely one part of international organized crime.

Monday, February 19, 2007

Like probably everybody else on the internet, I continually receive spam touting penny stocks. There are two in particular which appear to be "favorites" of the spamming criminals behind the usual stock pump and dump schemes: GDKI (Goldmark Industries) and CWTD (China World Trade Corp.) For whatever reason, we keep seeing this one crop up about every month or so.

I believe I first encountered spam for CWTD back in the Spring of 2003. For GDKI, that would be more like the Autumn of 2003.

Perhaps a brief synopsis is in order.

Why do spammers push stocks? Why specifically penny stocks? And why is there no link in the email, or really: anything at all other than a mention of the stock, and that it is "about to EXPLOOOOODE!!!11!!" and that we should "WATCH IT LIKE A HAWK!!!!11!!"?

This is a bit complicated, especially if you aren't an investor in stocks of any sort (and, trust me, 99.9333323% of all spam recipients are not investors, or have even heard of penny stocks.)

Penny stocks are stocks that (typically) smaller companies release when they want to go public. Unlike the Microsofts and the Google's of the world, who go public by releasing shares on very carefully controlled markets such as the New York Stock Exchange or the Nasdaq exchange, these stocks are referred to as "over the counter" (OTC) stocks, or "pink sheet" (PK) stocks. The reason is: they typically never leave the double digits in dollar values, and they usually trade in extremely low volumes.

This is not usually a bad thing, and in no way does it mean that the companies on these markets are in any way illegitimate or not operating "above board."

The scam that the spammers are participating in, however, is called a "pump and dump" scam. It's been around for a long time and it is 100% illegal.

The way it works is, scam artist buys lots of cheap stock, then tells "lots of investors" about the stock he just bought and how he believes it is "about to explode", then waits for these people to invest in the stock, which raises the price of the stock. Scammer then sells bulk volume (not all of what he bought, but a sizable amount) which makes him a profit, and causes the stock's price to plummet. Ta da. Pump and dump: explained.

The problem is: when spamming is involved, it makes the task of tracking down and identifying the culprit behind this particular scam a bit difficult. Sure, there are organizations out there that monitor these trades, but they typically don't have the manpower or other resources to investigate every single transaction for potential fraud. The spammers behind this operation have automated the whole thing, from the creation of the emails, and their stupid, distorted gif images which get attached to the emails, to the buying and selling of the stocks themselves.

On numerous spammer forums, several of the bigger stock spammers claim that it's possibly the most lucrative operation to run, if you're a spammer at all. It appears that an extremely high volume of spamming is required for this to have the desired effect, so the ones who profit the most from these operations tend to be owners of botnets numbering in the high tens of thousands, sending several hundred million such messages every single day, mostly to people who have no idea why they're getting them, or how to stop them.

By why these two stocks in particular?

Goldmark Industries wants to present itself as an actual, legitimate company. Or at least that's the goal of the website, and their subsequent press releases. They claim to specialize "in the production and distribution of Music, Feature Films, and Television entertainment for North America's most rapidly growing demographic... the Hip Hop community."

But when we dig a little deeper, we discover that this may be a shell company, a "paper tiger" if you will.

Nowhere on their website is there a single mention of any actual productions that they have participated in. Moreover, everything they talk about on that website appears to be about what they "hope" to be doing, immediately followed by examples of genuine artists who *have* done these things in the past, via very large-scale production and distribution companies. An example:

On their "Television Production" page they make the following claim:

The Hip-Hop community has made a large impact on the world of television entertainment. In addition to becoming one of North America's most watch television programming, Hip-Hop's growing consumer base has attracted some of the world's leading advertisers, such as Nike, Pepsi, and Sean John to name a few. In 1994, Snoop Doggy Dogg performed on "Saturday Night Live" wearing all Tommy gear, and Tommy sales increased $90 million that year.

Then they go on to say that they are "poised to become" a major entertainment company. Period. No listing of any shows they are developing, or artists they may be working with, or film companies they have affiliation with. Just that they are "poised" to become this mega force in the industry. I might as well make the same claim. So should you. We're all just as set to "break out" as Goldmark Industries.

This is a very confusing statement for any company to make if they want to be taken seriously by anyone. Spelling and grammatical errors aside ("most watch"?!), they just listed several entities with whom they appear to have zero affiliation of any sort. Anyone can go look up Snoop Dogg and discover that he's had absolutely no affiliation with this company. Same goes for Tommy Hilfiger, Pepsi Nike and Sean John. They also appear to be using outdated namings for these celebrities (Snoop Dogg hasn't used the "Doggy" moniker since at least 1995.) There is no mention, anywhere on their site, about current or future actual productions that this company is involved in or undertaking in any form, or any potential artists that they will actually be working with in any capacity.

This doesn't enstill confidence if you're a savvy investor.

This leads me to believe that the spammers are actually involved on a much deeper level, and at this time I have to preface this by saying that this is merely my opinion, but that it appears to be borne out by further investigation (and not just those done by me.)

If this spammer really wants to pull a fast one over everyone, what would be the biggest scam they could pull besides, well, everything they're already pulling? What if they were so organized that they poured the profits from their numerous illegal enterprises into a fake company? How much would it actually cost them?

Let's say I'm a spammer, and I have $2 million (USD) to bury. I could create a company antime I wanted, using fake contacts. I could then pump a lot of money into this company with the goal of bringing it to market. It wouldn't have to be a big market, clearly. Let's say I throw the $1 million into it. Thet gets me:

A new website, with hosting, propping up the new company

A declaration that I am releasing shares on the OTC / PK exchanges

A copywrighter (hired one time) to create numerous press releases. [possibly I do this part myself, unless I'm Russian]

Do that, wait a while, and start spamming. Wait for a sucker to buy the stock. On the surface, an amateur victim investor will see what appears to be a "legitimate" website, talking up a young upstart company. This could look like a golden opportunity for this victim investor. They might invest in only 1,000 shares, which at $0.02 per share would only cost them $20. Better get an even 10,000 shares! This could be huge!

Etc.

If the scam extends all the way down to whoever created the "company", how would anyone ever know? What legal action could be taken against such a company? Has this ever happened in the past?

I suspect the exact same thing is true of CWTD (China World Trade Corp.) Their website is similarly full of all kinds of hopes and dreams for this scrappy little company, claiming to be located in numerous major cities in China. Attempt to find out anything further to support this, however (including in Chinese, I have had numerous Chinese friends attempt to do so) and you'll quickly discover that they've never hosted a single event at any of these "locations", and that nobody has ever heard of them existing where they claim to be.

In short: (as if this needed repeating) DON'T invest in these stocks. Just don't. Both of these companies have been spammed to death since at least three years ago. It is a very bad financial decision to invest in a company whose background and reputation simply cannot be verified anywhere, by anyone, using any means at all.

Spammers: Stop spamming these "companies". Your days are numbered.

SiL

P.S. On a related note, this article in Australia's Herald Sun is worth a read.

I recently contributed to a new and fairly comprehensive Wiki website specifically dedicated to spammers and their operations. My first posting was a very detailed breakdown of the persistent illegal "pharmacy" operation known as My Canadian Pharmacy, thought to be run by a spam gang called "Yambo Financials":

That report has been circulated in an even lengthier and more detailed form to members of international law enforcement groups, as well as several spam fighting organizations. It was recently cited nearly word for word in a seminar which dissected a massive spam bot operation.

SpamIsLame

About Me

I am an independent fighter of those who choose to spam illegally, promoting either fake or illegal products to an unsuspecting public. Like most people, I despise illegal spammers and I will continue to spread knowledge on how to impact their ability to profit from spamming. There is a difference between "marketing" and spamming. Those who claim otherwise are idiots.